The problems are not only of US, because EU and many other countries are facing similar problems. Still US numbers are worse than EU ratios. The biggest problem, of course, is public deficit, which this year should amount to 8.5% of GDP in US. Such public deficit is a big problem because it is not so easy to get it balanced. For 2011 projected public revenue in US should reach $2.3 trillion, but outlays going to be at $3.6 trillion, which is 55% more than revenue.

When we are looking at public debt, there are many different ratios. The most inclusive is ratio provided in the table ‘general government net financial liabilities’ because it shows not only debts but eliminates publicly held investments.

Public debt together with public deficit shows the real situation of public finance. Both of those ratios are very important, while one of them shows current situation like a balance sheet, other shows the dynamics like income statement. If looking in both these criteria, EU is standing bit better than US, however both have similar problems.

National Debt Solutions

So problems are real, and let’s try to come to some possible solutions. Some of them might sound little controversial, but I think all of them are real to happen:

1.To do nothing radical, just to try control spending, increase some tax and reduce deficit by little every year, and maybe it will bring public finance no normal situation (US military spending makes almost 5% of GDP and is far the highest compared to other countries or even continents) . But this will work only with one condition: if GDP will grow. Growth of GDP would compensate a controllable growth of public debt and would protect from getting in a debt spiral, which happened to Greece.

2.Interest rates in US are kept at record low for a long time and there is not much room to decrease it more. But there is some decision possible: if money would be pumped further in the economy massively (money for governments doesn’t not really cost much), it would stimulate economy and of course cause high inflation. Maybe inflation is bad and hard to control, but it would help in this situation. Nominal GDP would grow rapidly and Debt/GDP ratio would become low in longer period. Debt would not be a problem anymore, but inflation would be one. The question is only which one is easier to handle. Of course investments in bonds would suffer from such scenario.

3.The third solution would allow solve two problems at once. Both economies of US and EU are suffering trade balance problems. Especially US, because trade deficit for EU countries is less significant. And there are two main problems for this misbalance: energetic recourses and China. It is hard to do anything with energy imports, but China problem might be solvable. China is not a simple country; it is like an elephant on small fishing boat that is ruining the balance of the entire world. China is holding weak local currency and is enjoying massive trade surplus. And nobody can do anything about that. The solution would be to put heavy taxes on all goods from China. That would solve two main problems instantly: trade balance would become normal; income from custom tax would help for budget deficit. Maybe such changes would not applicable to WTO, still sometimes is needed to decide what is more important.

Security Code:(Use only capital letters and numbers. If you can not see the code, click on the image.)

You are solely responsible for all content you post to the site.
investingforbeginners.eu reserves the right to edit or delete any and all reader comments.

Guest_CharlesCivy, (2014 Sep 5, 01:21)I just wanted to talk to a professional about my issues before I made any decisions. National debt relief answered all of my questions and gave me some really good adive. They tried to sell me on some of thier programs naturally, but I got a lot out of the phone call. Heres the number.. 855-531-0255 if anyone wants to give it a go.

This site does not offer the information to buy or sell any financial instruments.
investingforbeginners.eu is not responsible for the accuracy and fairness, as well as any third-party solutions or actions undertaken on
the basis of information provided by the website. It is strictly forbidden to distribute information, published on this website,
without the written consent.